It used to be that banks and credit card companies were the primary targets of financial fraudsters.
Not anymore.
Now digital payment providers like PayPal, Venmo, Cash App, and Zelle find themselves in the cyber data crosshairs.
According to the most recent Phone Scam Monitor Report, Zelle data fraud scams rose by 816% from 2021 to 2022. Meanwhile, PayPal data fraud incidents rose 31% over the same time period.
Higher scam rates are a big red flag, as they signal fraudsters see certain companies as easier targets.
“Scams that show fast growth are worth our attention, as they often become scams that dominate in years to come,” said Robert Lowry, the vice president of security at BeenVerified, which issued the Phone Scam report.
Fraud victims who participated in the BeenVerified survey say the payment structure linked to digital payment transactions lends itself to fraudulent behavior.
According to the report, rental scammers tend to bait victims with fake listings on Facebook Marketplace, then defraud them using Zelle as a common payment method.
Scammers often pose as rental property owners they don’t actually own, the report said. One scam victim told BeenVerified that she and her spouse paid $1,790 via Zelle for a rental property down payment only to see the payee take the money and run.
Pet scams are another hot market for fraudsters.
Cyber thieves post “pets for sale” online, ask for a deposit on the deal from unsuspecting buyers and once they receive the money, stop any communication with the buyers and make off with the cash. In two separate incidents using Zelle, buyers lost $700 and $1,000, respectively in fraudulent pet-related scams.
How to Fight Back Against Digital Payment Scams
Payment apps should be required to maintain the same protections that banks maintain for their clients. Unfortunately, they don’t have to bear that burden from a regulatory standpoint.
“As non-bank technology companies, they are not held to the same regulatory standards as banks,” said Industry FinTech chief technology officer Sandy Fliderman. “The payment apps want to reduce their liability and maintain client loyalty which drives their security and protection systems. But, they’re not required to provide guarantees to their clients or provide insurance such as FDIC.”
Another major issue is that these types of transactions are often irreversible.
“Unlike with a credit card, where you can dispute fraudulent charges, once a payment is made through a peer-to-peer app, it is typically impossible to recover those funds,” said Top Mobile Banks founder Tommy Gallagher. “This makes users particularly vulnerable to scams, as they have no way to get their money back if they fall victim to fraud.”
Additionally, digital payment apps often rely on users inputting their personal and financial information, such as bank account numbers and login credentials. “If this information falls into the wrong hands, it can be used to steal money or make unauthorized purchases,” Gallagher said.
Data security experts advise payment app users to be especially careful before sending money to people or companies they don’t know. Use these tips and tactics to keep your money and data safe in 2023.
Lots of Personal Data is Available Online
Don’t share personal information with any digital person or company you don’t know. One problem with Zelle is that it’s a basic service for consumers to send payments to one another using their banks, rather than using a third-party service such as PayPal.
“It largely relies on phone numbers and emails, which in theory are something that only friends and family would have,” said MerchantMaverick.com payment processing analyst Melissa Johnson. “But it's 2023 now, and that kind of data exists on big lists that can be purchased by nearly anyone willing to shell out the money."
Consequently, scam artists regularly mine lists of phone numbers and emails and routinely request payment, posing as friends and family.
“That's why Zelle now has a feature that notes when a contact name in your phone doesn't match the name associated with the account,” Johnson added.
Online payment platforms like Cash App and Venmo have made user handles public, meaning that just about anyone can request funds from someone as long as they know the username.
Because those accounts exist as digital wallets separate from banking accounts, there are different security issues,” Johnson said. “Accounts can be hacked, funds drained and sent to a bank account halfway across the world, and users can be left with very little recourse to get their money back,” she noted.
As a result, digital payment consumers need to learn the basics of online security and keep any account secure before engaging online.
“Know what it is you signed up for and make sure you know your username and password,” Johnson said. “If you struggle with remembering passwords, get a secure password manager installed on your computer and phone.”
Be smart when using digital payment platforms. Online payment consumers need to be vigilant when they see an email or texts stating that personal accounts are locked or when confronted with unexpected requests for funds, among other grifts.
“These are scams," Johnson said. “Never ever click a link from a text or email -- always go directly to a site or app and log in if you want to verify that a message is legitimate.”
Many times, these ploys rely on a sense of urgency and try to create panic to trick a person into acting quickly and without thinking.
“If you take just a moment to breathe and remember good internet safety, you can avoid any negative digital payment pitfalls,” Johnson added.
Be vigilant about data security for the long haul. Digital payment users should also take the following steps to keep their financial accounts safe and their data secure.
--- Mind the email address that’s sending you alerts. “Look for the official email (ending in @paypal.com, for example) instead of a fake address (like @paypal-support.com).” said data security expert Hope Oje, author of the book, SCAM.”
--- Don’t let anyone connect to your payment app on your behalf. “That’s the case even if they’re offering to pay you or issue you a refund that they claim to owe you,” Oje said.
--- Don’t click on any links in emails or text messages that you’re unsure of. “If you’re unsure of a message, don’t reply directly to the sender,” Oje added. “Go to the money transfer company’s app or website and contact support directly from there.”
